The Price of Wisdom
Thomas Motors’ collapse rippled through the entire startup world.
Up to that point, startups had been piling in with stories of future potential, pulling in investment on the strength of promises alone. The market was crawling with underfunded companies propped up by nothing but hype.
And then, this time, something finally blew up for real.
Investment firms halted the deals they had planned and began checking whether the companies they had already backed were actually worth a damn.
Businesses that hadn’t made a cent and had survived only on fresh capital started toppling one after another once the money stopped flowing.
The startup world’s reaction was simple: about time. From here on out, the real sorting had begun. The gems would be separated from the stones.
Rolf said, “You don’t think this’ll drag down our company’s value too, do you?”
“If anything, the opposite.”
Cooloud was nothing like Thomas Motors.
Unlike Thomas Motors, whose stock had risen on nothing but expectations and no meaningful revenue model, Cooloud was actually making enormous profits.
Market liquidity didn’t simply vanish into thin air. Once the shakeout was over, the companies judged to be genuine gold would be valued even higher.
Since he had been weighing the timing of both fundraising and an IPO, Alex had been paying close attention to market developments.
The reason this incident had captured his interest even more was that he knew exactly who had set it off.
He had thought there was no need to worry about them anymore, and yet...
“I can’t believe they pulled something like this in the meantime.”
“Looks like those bastards made a nice chunk of money.”
Alex thought it through carefully.
How much profit did they actually make off this trade?
According to what was known, they had bought put options and then multiplied their position tenfold through CFD trading.
That kind of move was impossible unless you were absolutely certain the stock was about to crater.
“I can only say they’re impressive.”
“Impressive? Come on. All they had to do was uncover the fraud and expose it.”
Alex let out a short laugh.
“Do you really think it’s that simple?”
If it were truly easy, the market would be full of investors who made their money shorting stocks. But plenty of people had made money by buying shares; very few had made it by betting against them.
“It’s like Columbus’ egg.”
Anything looked simple once you already knew the result. It was only impossible when it was time to do it yourself.
After hearing the explanation, Rolf nodded.
“Still, your brother took a loss too, right?”
“He did.”
Shark Management’s losses from this mess were about $1.3 billion at the time.
It was an enormous number, but in terms of total assets under management, it was only a minor hit.
Even so, this was the first time one of Michael Preston’s funds had posted a negative return. No, worse than that, he had been hit squarely without even managing a decent defense.
The blow was so shocking that the LPs had even demanded they stop considering investments in other hydrogen car companies.
There was no doubt about it: Michael Preston had taken a tremendous hit to his pride.
Rolf asked with a grin, “That works out for you, doesn’t it?”
“It does.”
He was the third son of the Preston family, famous as a financial dynasty.
Everyone in the family was essentially a rival. Among them, Michael Preston had been out in front. So the more his brother stumbled, the higher his own chances of inheriting the family fortune would climb.
“You were right. David Lockhart really is something. When I first heard about him, I thought he was washed up.”
Everyone was talking about David Lockhart. Yet for some reason, Alex kept thinking about the Korean man who had been with him.
Han Miru, was it?
Rolf kept going. “I’m still pissed about giving Sid fifteen percent because of those bastards. They put ideas into that obedient little nerd’s head and ended up costing us who knows how much.”
They had immediately figured out that Sid Lucas was the key man at Cooloud. Then they had also picked up on the weakness in Thomas Motors.
That was the standard hedge fund play: identify the other side’s weakness quickly, then strike when the timing was least expected.
Every company had an Achilles’ heel. But for an outsider to identify it was no easy task.
Once might be luck. Twice would not be.
That meant they were capable.
But whose ability was it, really?
Alex thought back to the two men who had visited the company before.
They had proposed acquiring Cooloud. When that failed, they had tried to pry Sid Lucas away and had failed at that too.
And then, out of nowhere, they had surfaced as the lead players in the Thomas Motors fiasco and shaken up Wall Street.
What they had gained from that was not just money.
It was reputation.
With a single report, they had sent the stock of a company in the market spotlight plunging ninety percent and proved that every other investor had been wrong.
In finance, reputation carried tremendous weight. From now on, everyone would be watching what David Lockhart wrote and where he invested.
Then, at that moment, Alex realized something was off.
Seeing his expression, Rolf asked, puzzled, “What is it?”
After a moment, Alex spoke.
“Was stealing Sid really their goal?”
“What do you mean?”
Alex gathered his thoughts as he spoke.
“They knew Sid was a core talent at Cooloud. That’s why they even offered to set him up with his own company in an attempt to poach him.”
“But they failed.”
They had bound Sid to Cooloud with every clause under the sun. By now, pulling him out would be impossible.
In the end, Continue Capital had gained nothing.
Did those meticulous bastards really fail?
Maybe they had another purpose entirely.
Rolf said, “Do you really need to care? We’re never going to see those guys again anyway.”
After thinking it over for a moment, Alex nodded.
“I suppose not.”
He was trying to shake off the uneasy feeling when the intercom rang.
There is a visitor here.
Rolf asked, “Out of nowhere? Who is it?”
They say they’re from Continue Capital.
The two of them looked at each other.
* * *
After hearing from Sid that Alex and Rolf were at the company, we headed to Cooloud.
In the lobby, I told the staff, “I’m here to see Alex Preston and Rolf Buchi.”
“Do you have an appointment?”
“No, I don’t. But I have something important to discuss, so would you please pass that along?”
We waited for a while in the lobby.
David asked, “What if they refuse to see us?”
“Then I’ll at least stop by and see Sid while I’m here.”
If that was the case, wouldn’t they agree to meet us just to keep us from meeting Sid?
In the end, there was no need for that. We were shown inside. Unlike the conference room we’d used before, this floor was completely cut off from the staff.
Not long after, Cooloud’s cofounders, Alex and Rolf, came in.
I said to them, “Long time no see.”
“Hello.”
Alex returned the greeting, while Rolf only gave a perfunctory nod.
Alex said to David, “I heard your Thomas Motors investment was a huge success.”
“The rumor has already spread that far?”
“No one on Wall Street would be unaware of it.”
So even with his body in Silicon Valley, he still considered himself a Wall Street man?
David Lockhart, once branded a failure who had brought down a once-powerful private equity firm, had reversed his reputation with a single trade.
Looking at it that way, life really did turn on one shot.
Rolf said with a sneer, “Well, well. Sounds like you made some money.”
I shrugged. “Enough.”
“So what are you here for this time? Don’t tell me you’re trying to poach our people again.”
He must have been plenty angry about the Sid situation.
“Hardly. And we never tried to poach him in secret. We were trying to recruit him openly and properly.”
Rolf made a finger gun and pointed it at me.
“Save it. I’m warning you, if you so much as sniff around Sid one more time, I won’t just let it slide.”
“And if you don’t let it slide, what? You’ll shoot me?”
“I might.”
I gave a snort of laughter.
“Then I’d better stay away from him if I don’t want to get shot.”
What was there to poach when the man was already mine?
Alex quietly held Rolf back and asked, “What brings you here today?”
“I just had something I wanted to say.”
“And what’s that?”
“I’d like to acquire Cooloud.”
He shook his head.
“I don’t know how much you made on that investment, but it won’t come anywhere near enough to buy Cooloud.”
Rolf said mockingly, “Maybe if you brought about two hundred billion dollars in cash, we could think about it.”
Neither of them seemed to have even the slightest desire to sell the company. In that case, I would just have to give them a reason to want to.
“The market values Cooloud at around seventy billion dollars, doesn’t it?”
At that, Rolf said with obvious contempt, “Who says?”
Alex answered, “That was then. We recently received a new investment offer. Someone proposed buying fifteen percent for fifteen billion.”
At that price, Cooloud’s valuation climbed to one hundred billion dollars.
“And let me be clear again: we might consider selling equity, but we have no intention of selling the company.”
Neither of them was stupid enough to cut the goose open just because it laid golden eggs.
In fact, even after the IPO, they each held on to stakes in the twenties. After the Jason Kim incident, they stepped back from management and were effectively forced down to fifteen percent, but they were still major shareholders.
Thanks to that, both of them could sit comfortably among the world’s top five richest people.
Rolf said, “But how much are you actually offering? We’re not interested in selling, but I’ll hear you out.”
David said, “Whether it’s seventy or one hundred billion, that’s only the market’s valuation. And that price includes a bubble. Cooloud’s true value should be set much lower than that.”
Alex looked at David and asked, “Why?”
David answered calmly, “Because Cooloud’s business model isn’t sustainable. At any time, external factors could bring the business to a halt.”
Alex frowned, and Rolf looked incredulous.
I looked at Rolf and asked, “Anything coming to mind?”
“What kind of bullshit is that? Are you saying Cooloud pulled a fraud like Thomas Motors or something?”
“……”
For once, he looked as if there wasn’t a single speck of shame in heaven or on earth. I was briefly at a loss for words at the sheer shamelessness of it.
Had he forgotten everything that had happened back then? Or did he genuinely think there was no way he’d ever get caught?
“If you’re so confident, why don’t you write a report on Cooloud the same way you did for Thomas Motors?”
I looked at him. “Oh? You’d really be fine with that?”
Rolf was openly laughing at me.
“Ha! Go ahead and write it if you want.”
“You won’t regret saying that?”
“Of course not. Go on, write whatever you want. I’d love to see what you come up with.”
“So you think I can’t do it?”
“I’m saying go ahead and try, if you can. Just be ready to get sued.”
I handed him the document envelope while he was still grinning.
“I’m curious whether you’ll still be saying the same thing after reading this.”
“What is it?”
“You’ll see.”
Rolf pulled the papers out of the envelope.
The moment he saw them, all the color drained from his face.